US Savings Bond
US Savings Bond is one of the safest investments as it is endorsed by the US Federal Government. It is virtually risk free and offers less interest rate as compared to other investments such as stocks.These bonds are non-negotiable and provide fixed rate of interest over the limited time span, which is exempted from state or local taxes.
They cannot be easily transferred and are popular among American citizens because it gives better interest rate than the savings banking account.
Savings Bond is backed by full faith and credit of the US government. The interest earned can be tax deferred until the Savings Bond is redeemed; unlike the savings banking account or CD's, where the interest is fully taxable every year similar to the normal income.
US Savings Bond were introduced to fund World War I, and were formerly known as Liberty Bonds. Since 2002, the Treasury Department lowered the interest rate on Saving Bonds and closed their marketing offices.
Savings Bond is excellent for investment between 5 to 10 year’s span. After 5 years, the amount can be withdrawn without penalty however, continuing the bond above 10 years is not advisable, as other investments yield better interests for long term investment. Savings Bond cannot be redeemed within a year, and if it is withdrawn within 5 year’s span, then 3 month’s interest will be forfeited.
Interest Rates on Savings Bond:
The interest rate issued every time varies due to other economic interest rates. During November 2007 to April 2008, the EE Bonds earned 3.0% interest rate. Since November 2007, I Bond earned the interest rate of 4.28%. The Savings Bond interest rate floated as low as 2.47% in 2003 and as high as 6.31% in 1995.
Series EE Bonds:
Series EE Bonds are the replacement of E Bonds (no more issued by the US Territory). The Bonds purchased after May 1, 2005; yields fixed rate of interest. The EE Series Bond purchased between May 1997 and April 30, 2005; will gain variable interest based on the five year’s market yield.
Electronics EE Bonds:
These Bonds can be purchased online through Treasury Website, and are sold at face value that is one has to pay $25 for $25 Bond deal. It can be purchased worth any dollar amount starting from $25, and the maximum purchase permitted per calendar is $5,000.
Paper EE Bonds:
These Bonds are sold at a half rate of their face value that is one needs to pay $25 for $50 Bond. These Bonds are available in predefined denominations starting from $50, and the maximum purchase permitted per calendar is $5,000.
Series I Bond:
The interest rate offered by this Bond depends on the inflation rate. This Bond can be purchased electronically and are sold at the face value.